K-1 partnership entries Lines 9 and 10: when should I use the "Passive" inputs versus the normal inputs for long term capital gains and 1231 gains?

Forum|Forum|6 years ago
December 7, 2019
1 reply
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The taxpayer is a limited partner in an investment partnership. The cover letter and K-1 notes do not suggest that any income/deduction is non-passive, so I am treating the entire activity as passive. The reason why this matters is because passive activity credits (Line 15 J and M) are allowed if I enter the gains in the "Passive" input. If the gains are entered in the normal boxes then the credits are disallowed and I have to paper file.

Lacerte Tax

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Best answer by PhoebeRoberts

In the absence of additional information, I default to portfolio for capital gains and losses, and passive for 1231 gains and losses. When I get a K-1 with additional information, that's generally the breakdown. (And then there are the ridiculous nonsense ones, that say "$10 of your qualified dividends are passive," and to them I roll my eyes and move on because there is no way I'm freeing up passive losses against that.)

FYI, you can print the credit form (3800?) to PDF, attach it to the efile, delete the passive credit entries, efile the return, and re-enter the passive credit entries to proforma to the next year, when you have that diagnostic. I actually just duplicate the file, efile the PDF version, and proforma the "as if on paper" version. No way am I paper filing that mess of a return.

PhoebeRoberts

Answer

Intuit Community Champion

In the absence of additional information, I default to portfolio for capital gains and losses, and passive for 1231 gains and losses. When I get a K-1 with additional information, that's generally the breakdown. (And then there are the ridiculous nonsense ones, that say "$10 of your qualified dividends are passive," and to them I roll my eyes and move on because there is no way I'm freeing up passive losses against that.)

FYI, you can print the credit form (3800?) to PDF, attach it to the efile, delete the passive credit entries, efile the return, and re-enter the passive credit entries to proforma to the next year, when you have that diagnostic. I actually just duplicate the file, efile the PDF version, and proforma the "as if on paper" version. No way am I paper filing that mess of a return.

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